The Court of Appeal has allowed the liquidator of BHT Group Ltd to appeal a High Court ruling that would have given Unitherm Heating Systems Ltd priority to recover €93,907.65 from the resale of goods supplied to BHT.
In a judgment delivered on 29 July 2015, Ms Justice Irvine concluded that BHT and Unitherm had a creditor-debtor relationship when BHT resold Unitherm’s goods to its customers. The court found that Unitherm’s standard conditions created a charge over the sale proceeds, which required registration under section 99 of the Companies Act 1963. Because it was not registered, the charge was invalid and void against the liquidator.
BHT operated a retail business from about 40 locations across Ireland. Unitherm supplied it with heating goods for resale. The disputed €93,907.65 related to goods that BHT had resold before the liquidator’s appointment and for which customers had paid BHT. A further €13,853.49 related to unpaid goods still in BHT’s possession when assets were sold to Washglade Ltd; the liquidator accepted Unitherm’s retention of title over those goods and that sum was paid to Unitherm.
Unitherm’s conditions said that resale proceeds were to be held in trust and lodged in a separate account. But BHT had not opened such an account, and it used the proceeds in its ordinary business. The court also considered the 60-day credit period BHT had been given to pay Unitherm, the terms permitting resale in the ordinary course of BHT’s business, and the commercial documents, which showed BHT invoicing its own customers.
The High Court had found that BHT acted as Unitherm’s agent and held that the proceeds were held on trust. It ordered an account and inquiry to trace the €93,907.65. On appeal, Unitherm also argued that BHT had sold the goods as a trustee in possession. The Court of Appeal rejected both arguments, finding no evidence that the parties intended an agency or bailment relationship for the resales.
The appeal concerned the legal effect of the proceeds clause and the status of the disputed proceeds. The Court of Appeal allowed the appeal and held the charge void against the liquidator. The judgment does not state the replacement order sought by the liquidator or specify any further directions made after allowing the appeal.